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Acorn: Where's the Oak?

Pulled down by an embezzlement scandal and a lightning rod for right-wing attacks, the deeper tragedy at Acorn is how Wade Rathke turned community organizing into a personality cult that prevented the emergence of a new generation of leadership.

You may have heard about the embezzlement and cover-up scandal at the community organizing group known as Acorn.

As was common for nonprofit groups in the late sixties and early seventies, Acorn started out as an acronym for the Association of Community Organizations for Reform Now. But at this point, the whole acronym thing seems dated and, yes, corny, as in "Oh Grandpa! That joke is soooo corny."

Stephanie Strom in the New York Times covered the story through the summer:

The revelation that a whistle-blower in the organization had forced the disclosure of a nearly $1 million embezzlement in 1999 and 2000 by Dale Rathke, brother of Acorn founder and leader Wade Rathke. The embezzlement was kept a secret from the organization's board, revealed only to a select group of senior organizers. During this time the Rathke family was paying restitution at the rate of $30,000 a year while Dale stayed on the payroll with a salary of $38,000. ("Funds Misappropriated at 2 Nonprofit Groups," July 9, 2008, possibly still available here.) Mr. Wade Rathke resigned from some of his posts, but retains the role of chief organizer for Acorn International.*

The follow-up revelation that the rest of the restitution was subsequently paid by Drummond Pike, founder and CEO of the Tides Foundation (EIN 51-0198509 Form 990) and the whole tribe of Tides organizations. Wade Rathke sits on the Tides board. Mr. Pike started Tides in 1976, while Mr. Rathke started Acorn in 1970. The two are close friends. Mr. Pike made the payment personally, not using Tides funds (his Tides salary is $200,000 a year). ("Head of Foundation Bailed Out Nonprofit Group After Its Funds Were Embezzled," August 16, 2008, possibly still here.)

Then two Acorn board members filed suit to gain access to financial records and to further limit the continuing involvement of Wade Rathke in the management of Acorn. ("Lawsuit Adds Turmoil for Community Group," September 9, 2008, try here.)

The picture that emerges here is of a couple of organizations (Acorn and Tides) whose long-tenured leaders have created complicated structures that they control with no checks and balances and no transparency, because the structures are so complicated only they understand them.

Even worse, evidence emerged that Mr. Rathke has made sure that the Acorn organization remains personally answerable to him. Writing in the Chronicle of Philanthropy (secure behind subscriber walls available here), Pablo Eisenberg provided this disturbing insight:

But every nonprofit group, especially as it grows, needs checks and
balances. Trust alone is not good enough, and the management council at
Acorn, which was not set up to be a decision-making body, had too
little influence in overseeing the chief executive.

Some of its members say they kept pushing for more authority, and
for the ability to meet with the organization's board members, but they
say Wade Rathke made sure that he was the only staff member with access
to Acorn's board.

Questions about who should set the organization's agenda were not
limited just to the role of organizers and the board. Wade Rathke
sought to put the national organization in control of operations of the
group's affiliates. For example, the organization's bylaws gave him the
power to appoint the head organizers of both local and state affiliates.

While local boards technically had the authority to overrule his
appointments, they rarely did, according to senior staff members. They
say Mr. Rathke refused to accept the decision of the board of Acorn's
Los Angeles affiliate to appoint Amy Schur, widely considered by Acorn
insiders as one of the organization's most capable organizers, as its
head organizer. As a result, Ms. Schur left the network. Her departure
prompted another highly respected organizer, Madeline Talbott, director
of Illinois Acorn, to pull her organization out of the network.

Mr. Rathke says he did not try to block the appointment of Ms.
Schur, but she and her colleagues say that he played a key role in
denying her the job.

The decision to keep so much control over the affiliates seems at
odds with Acorn's mission — its goal is to empower local people to
fight their own battles — but some organizers agree with Mr. Rathke
that it is important to centralize operations. They say only a unified
network led by headquarters has the power and speed needed to wage
successful national advocacy efforts.

Other major organizing networks disagree with this view and set up
their affiliates to operate as independent charities, unlike Acorn
whose affiliates do not have charity status under the Internal Revenue
Code. They believe that this structure provides much greater local
accountability, an approach Acorn may have to consider as it seeks to
regain the trust of donors and other supporters who have been dismayed
by the cover-up of the embezzlement.

Since Acorn does not provide a consolidated financial statement, it is difficult to assess how big the organization is. Peter Drier and John Atlas in the Huffington Post ("Acorn under the Microscope," July 14, 2008, perhaps here) provided this synposis:

ACORN and its affiliates have an annual budget of over $100 million,
over 1,000 employees, and nearly 500,000 dues-paying families. In
addition to chapters in 103 cities in 38 states, ACORN's family of
organizations include two union locals, two non-profit southern-based
radio stations (KNON and KABF), several publications (including the
magazine Social Policy), a nonprofit group that builds affordable
housing and provides homeownership counseling (ACORN Housing), a
nonprofit law office, and a variety of other vehicles that supported
its direct organizing and issue campaigns, such as the Financial
Justice Center and the Living Wage Resource Center.

Now this sounds impressive, and the article goes on to list numerous activities over the years, but for an organization in the business of providing housing, $100 million is extremely small potatoes. To me there are all the signs here of an organization spread far too thin to be effective at anything. It's telling that Mr. Rathke's ongoing activities with Acorn involve the international division, which means lots of travel and even less accountability for results.

Acorn clearly hasn't come close to meeting any measurable objectives in political organization, unionization (their main target seems to be Wal-Mart, which remains 100% non-union), or housing. Nevertheless, the group has succeeded in becoming a whipping post for right wing bloggers, to which they have provided no effective response.

The most fundamental control for nonprofit organizations is regular, systematic turnover of executive leadership. Organizations need to have a process for recruiting or grooming leadership and transitioning them along after a reasonable period. Executive tenure over a decade is always going to be problematic, especially since board tenure is typically much shorter. Some people would like to call it founder's syndrome, but the issue isn't about being a founder as much as it is about being in power long enough to be the only one remaining who really understands how everything works. The result is often a crash-and-burn scandal, confirming the adage that absolute power corrupts absolutely.

The issue here is more serious, though. For Mr. Rathke and Mr. Pike, staying in charge too long has meant that a whole generation of progressive organizers have been deprived of a chance to develop real leadership at a national level. It seems possible to me that these two selfish leaders have effectively kept progressive politics stuck in a nostalgia groove for the last two decades.

* The IRS filing of Acorn International (EIN 52-2416966 Form 990) in 2006 shows that Wade Rathke receives compensation of $94,487 from a related, non-tax-exempt organization called Chief Organizing Fund (EIN 11-3698880). Not coincidentally, I think, this Mr. Rathke's preferred title at ACORN is chief organizer (for instance, his blog is chieforganizer.org). Being a non-exempt organization means that the financial reports of the COF are not available to the public. Also not coincidentally, the Tides Foundation tax filing shows that it supports the Chief Organizing Fund.

In silence,in steadiness,in severe abstraction, let him hold by him-delf, add observation,patient
of neglect,patient of reproach, and bide his own time,happy enough if he can satisfy himdelf alone that thia day he has seen something truly.Do you understand?